Tue May 13, 2014

Pub Owner Frustrated That Health Plan Prices Keep Jumping

Paul Siperke, co-owner of Cleveland brewery Fat Head's, plans to keep providing health insurance to his employees. But he's irked by the continual price fluctuations in the group's policy — this year caused partly by the Affordable Care Act.

Paul Siperke is the co-owner of Fat Head's Brewery & Saloon, a popular brewpub in Cleveland. He has fewer than 50 full-time employees, so he's classified under the Affordable Care Act as a small business. He doesn't have to provide health insurance to his employees, but that's what he's been doing since the bar opened in 2009, despite some pretty dramatic volatility in rates.

"They just seemed to keep going up every year," he says. "One year we got a 38 percent increase; another year we got 11. One year we got 3."

This year, under the Affordable Care Act, he saw another hike — this one about 20 percent.

"It just seems odd that we get such a drastic price increase when nothing has really changed with us as far as our employees and health issues," he says.

Most of the workers at Fat Head's are in their 20s and 30s. They are healthy, enthusiastic about their jobs and grateful for health coverage.

Until now, if employees were healthy and claims were few (as they are at Fat Head's), the company's cost of insuring those employees was relatively low. But for a small business, if even one employee was in a car accident or was diagnosed with cancer, the amount the insurance company charged the firm to cover those employees could skyrocket the next year. The insurance industry calls this "experience rating," and it is changing under the health law, says Steve Millard, who heads a small-business association in Cleveland.

"If you're a really healthy company and have a really good rate relative to everybody else today, you're probably going to pay a lot more for insurance [going forward]," he says, but, "on the flip side, if you have chronic conditions and difficulties, and an older workforce and are paying a lot more, you'll probably see some benefit in health care reform."

This means more businesses will see their insurance costs go up than down, at least in the short term. The Council of Smaller Enterprises, the regional support group for small businesses that Miller heads, estimates about 20 percent of smaller companies in northeast Ohio are seeing some sort of price relief this year. The other 80 percent are getting price hikes.

Northeast Ohio is a microcosm of what is happening nationally. In February, a federal report commissioned by Congress projected that about two-thirds of small businesses across the country will see the costs of their employee health plans rise.

"The initial sticker shock that's occurring this year or next year, or the following year when plans finally have to come into ACA compliance — that's what I'm really worried about," says Kevin Kuhlman, the manager for legislative affairs at the National Federation of Independent Business. "I'm worried that small-business owners will not be able to continue offering policies because the costs are too high."

We're in a transition period, says Jonathan Gruber, a health economist at MIT. It will sting at first, he says, but, "once we're in this system, we're not going to see that year-to-year variability we've seen traditionally. We're not going to see these huge swings year to year — one of your employees gets sick and all of a sudden your rates double. That goes away now.

"The main thing," Gruber says, "is we're moving to a system that is going to be much more stable."

But bar owner Siperke says he's frustrated.

"I always thought that health reform was needed of some type," he says. "It just seems like ... they botched it."

Still, Siperke says he's committed to providing health insurance to his workers — and, so far, the increase is a financial hit he can handle.

So here's what happens when Obamacare walks into a bar. We're going to go to a specific bar in Ohio, where the owner provides health insurance for his employees. It can cost a lot of money. Small businesses can see dramatic fluctuations in their insurance costs from year-to-year. The Affordable Care Act may eventually make prices more stable for businesses with fewer than 50 employees.

But as Sarah Jane Tribble of member station WCPN reports, this bar owner is anxious.

SARAH JANE TRIBBLE, BYLINE: Paul Siperke is the co-owner of Fat Heads, a popular brew pub in Cleveland. He has fewer than 50 full-time employees, so he's classified under the Affordable Care Act as a small business. He doesn't have to provide health insurance to his employees but that's exactly what he's been doing, despite some pretty crazy volatility in rates.

PAUL SIPERKE: They just seemed to keep going up every year. One year we got a 38 percent increase, another year we got 11. One year we got three.

TRIBBLE: This year, under the Affordable Care Act, he saw another hike - this one for about 20 percent.

SIPERKE: It just seems odd that we get such a drastic price increase when nothing's really changed with us, you know, as far as our employees and their health issues.

TRIBBLE: Most of Fat Head's staff is in their 20s and 30s. They are healthy, enthusiastic about their jobs and grateful for health coverage.

SIPERKE: One beer for you, sir.

TRIBBLE: Until now, if employees were healthy and claims were few, like at Fat Heads, premium prices were relatively low. But, for a small business, if even one employee was in a car accident or was diagnosed with cancer, insurance costs could skyrocket the next year.

The industry calls this experience rating. But that is changing, says Steve Millard, who heads a small business association in Cleveland.

STEVE MILLARD: Which means that if you're a really healthy company and have a really good rate relative to everybody else today, going forward, you're probably going to pay a lot more for insurance.

TRIBBLE: But, he says...

MILLARD: On the flip side, if you have chronic conditions and difficulties and an older workforce and are paying a lot more, you'll probably see some benefit from healthcare reform.

TRIBBLE: In this new math world, more businesses will see prices go up than down - at least in the short term. COSE, the small business group Millard heads, estimates about 20 percent of smaller companies in the region are seeing some sort of price relief this year. The other 80 percent are getting price hikes.

And Northeast Ohio - as it turns out - is a microcosm of what is happening nationally. In February, a federal report commissioned by Congress projected that about two-thirds of small businesses across the country will see their costs rise.

Kevin Kuhlman is manager for legislative affairs at the National Federation of Independent Businesses. He worries that small businesses will drop insurance.

KEVIN KUHLMAN: The initial sticker shock that's occurring this year or next year, or the following year, when plans finally have to come into ACA compliance, that's what I'm really worried about. I'm worried that small business owners will not be able to continue offering policies because the costs are too high.

TRIBBLE: We're in a transition period, says Jonathan Gruber, a health economist at MIT. It will sting at first, but...

JONATHAN GRUBER: Once we're in this system, we're not going to see that year-to-year variability we've been seeing traditionally with huge swings year-to-year. You know, one of your employees get sick and all of a sudden your rates double, that goes away now. We're moving to a system that is going to be much more stable.

TRIBBLE: Back at Fat Heads, Siperke says he's frustrated.

SIPERKE: I always thought that health reform was needed of some type, it just seems like they did something but they botched it.

TRIBBLE: But, he adds, he's committed to providing health insurance to his workers. And, so far, the increase is a financial hit the brewery can handle.

For NPR News, I'm Sarah Jane Tribble in Cleveland.

CORNISH: This story is part of a reporting partnership between NPR, WCPN and Kaiser Health News. Transcript provided by NPR, Copyright NPR.